It may be a leak, however HMRC’s plans for Making Ambridge Digital 'M.A.D.' accidently went public together with the government's 'Get me out of a Hard Brexit' papers on HMRC's What's New? pages last week.

Apparently, HMRC have conducted extensive market research and found that over 17% of 8% of the 25% of the missing tax that is known as the 'Tax Gap', has probably, well nearly definitely, been lost in the county of Borsetshire

Official Statisticians have calculated that a sizeable chunk of that gap (this is know internally as 'the Crevice') has a high (that is as in an eight out of nine cats, type of statistic, rather than the nine out of ten sort) probability of arising in a small village called Ambridge.

HMRC’s Fraud Rural Fictional Villages customer service team (FRFV 8033) have been reviewing the self assessment returns of the locals. Of a village that is big enough to support nearly a whole cricket team it transpires that only 5 businesses have registered for self assessment and 3 of those might just be hobbies, plus 8 individuals.

A brown envelope drops onto Brian and Jennifer Aldridge's doorstep.

Jennifer picks it up and hands it to her husband. ‘I say, Brian, I looks like your friends from HMRC have sent you a Christmas card…’

Brian’s face falls, ‘I think not, Jenny. This is not a card, it’s not even a tax demand, it’s a notice mandating me: HMRC have decided to Make Ambridge Digital’.

‘Make Ambridge Digital, that sounds Mad!’ snorts Jenny (she's been on the gin since breakfast).

‘It is Mad: M-A-D’ says Brian, ‘Half the village has not even got electricity let alone an internet connection...’

Over in The Lodge, Peggy is attempting to secure a new collar on her vicious cat ‘Hilda Ogden;.

‘Now, now kitty, good kitty’...

The post falls through the letter box and Hilda throws herself at the letter box sizing a brown envelope in her little but vice-like furry jaw.

‘Bad kitty, bad kitty’ says Hilda tearing the envelope out of the cat’s mouth.

‘What’s this; Making Ambridge Difficult? Where are my glasses?

'Look' says Noluthandu (she's back for Christmas), 'they say that there is an App. Let me download it onto your phone, Gran. You have got internet haven't you?'.

'Oh, I might have. They offered me something called 'Infinity', then they got very confused when I ask them for how long? I cannot seem to make the thing work'.

'Is not infinity forever Granny?'

'Well that's what I thought too, Nolly but I am 94 and I thought that was quite long for a contract, I mean I may only want a year or two.'

'Granny, your phone does work...and you've taken 150 selfies, what on earth..? You have dimmed your phone...'

 The post arrives at a Dower House.

'Oh what’s this, a tax demand?' shrieks Lilian, 'Ah, it’s for you Justin.'

'No, not for me, this is for Damara, HMRC are mandating Making Ambridge Digital. That’s funny actually; it spells M-A-D.

'Surely there is some mistake then,' Lilian chortles, 'Damara is MAD already?'

'Lillian, what are you talking abut? Of course we are a modern digitally enabled company. Toe, Scratch and Pinkthing our accountants already deal with that side of the business.'

Down at Grange Farm Joe collects the post from the gatebox.

He peers at the letter in the brown envelope: ‘What’s this? MAD? I have been taking my tablets.’

'No Dad,' says Eddie, ' they mean different sorts of Tablet, they are talking about smart phones.'

'What’s a ‘smart phone’? We haven’t even got a mobile signal down here,' mutters Joe

'Ooh Eddie', Clarie wails, 'I think we are digitally inept.'

'It’s worse than that Clarie,' says Eddie,' I haven’t filed a tax return since 2003. Hang on…we could be…OK. Dad, you old fool, you shouldn’t have opened this it was addressed to Caroline…'

 Down at the Bull, Kenton is dealing with the deliveries from the brewery. He ignores HMRC's brown letter as Jolene does all the financial stuff and it accidently gets dropped into the recycling bin...

The Vets, the Lawyer, the Hotel, the Country House and the Nursing Home (that's the one that is never actually mentioned on the radio show) also receive HMRC's MAD for VAT notice. Their businesses are all VAT registered and HMRC wants them to join a test pilot.

They pass it to their accountants: they are sensible enough and profitable so they delegate all nasty tax things to the accountants. They may well be mandated into MAD for VAT from April 2019.

 'Ooh David', says Ruth, 'do you think we can avoid MAD for VAT by giving some of the business to Pip and deregistering?' She's down at Brookfield and I am struggling with the Farmers Flat Rate VAT scheme. I don't like VAT and the idea of MAD VAT is just plain scary.

'No a chance', says David, 'I don't trust her choice of boyfriends enough.'

 The Fairbrothers, Rex and Toby are still locked into a partnership dispute and self assessment and VAT are not something they have considered. With the rumours of M.A.D. now circulating the village, they realise that they do not need to worry about M.A.D. for VAT for the moment as they are not VAT registered. However, they might be able to carry back their openning year losses for income tax. They subscribe to and they swiftly realise that all their trades are totally uncommercial and there is no carry back available.

Of course, Tony Archer’s losses have long been blocked as HMRC always treat him as hobby farming. Tom has some sympathy as both he and his Dad, Tony are in the same trap and now Tom’s losses are blocked because he keeps totally changing the nature of his trade.

In next time's episode:

What does the village do with the MAD for VAT test pilot? Is this a re-run of the Wicker Man?

In the one after:

The village prepares for a Hard Breakfast.

Useful guides for the locals

Making Tax Digital: the real index and timeline

MVD Tool: who really has to join Making VAT Digital 

Losses, restrictions and hobbies

A to Z of trades and professions and their tax treatments

Back to Nichola's SME Tax w-update 14 December 2018